The VMS Price Wars Have Begun

Until 2010, the VMS market enjoyed peaceful growth. Now, with unprecedented price drops, the market faces great turbulence and changes. Users should gain from manufacturer's pain.

Out of nowhere, last summer, Milestone dropped the price of its entry level VMS by more than half and then released a new version for free. Their competitors were caught flat footed, most in denial or disbelief of Milestone's actions. After all, VMS prices for software supporting 3rd party IP cameras have been relatively stable for years. For the rest of 2010, the market was rather quiet. Last month, Milestone noted how their moves was accelerating traction in the market.

The move makes good sense for Axxon as Axxon is aggressively expanding into Western Europe and the US (strongholds of incumbents like Milestone and OnSSI). Giving away free VMS software allows them to build their user base quickly while attacking the profitability of their established competitors.

Axxon won't be the last. Momentum is building. It's a vicious cycle for manufacturers. Each new one who drops their price forces the others to match or to suffer the consequences of being priced out of the market.

Projections

We project that by the end of 2011, the new price range for entry level VMS software, per camera, will be from free to $50 USD. This is a massive price drop from the beginning of 2010 when the price range was $100 - $150 USD.

We expect at least 6 more well known VMS providers to release free or heavily discounted VMS software by year's end.

This will put enormous pressure on VMS providers, of course, and will also hurt DVR providers and VSaaS (as they will be forced to match price decreases - these solutions are direct substitutes).

Whatever VMS companies do not match will essentially be waving the white flag and exiting the small to mid size market. Worse, they may hurt their ability in the large scale markets as well. Many integrators will become comfortable with the skills and experience they gain from using the free offerings and then prefer to simply upgrade to that supplier's premium/paid versions.

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How Users Gain

For 10-20 cameras, you should expect to save $1,000 per project. In a small project, this could reduce the total cost of the job of 5-10% - a nice savings.

How This Makes Business Sense

Most VMS suppliers will make money by giving away basic VMS software and charging for more advanced features that are important for larger camera counts or complex security needs.

Because the Internet makes it cheaper to distribute software, this type of model - generally called freemium - is validated as profitable path that provides low cost marketing.

For more on VMS software and these fast changing trends review our in-depth reports on:

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The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.